Lending into or out of the Gelephu Mindfulness City turns on a question that is easy to get wrong: whether what you are doing is a regulated activity, and if so what perfecting your security and withholding on interest require. Basnet Law Pte. Ltd. is the first law firm incorporated in GMC. We advise banks, non-bank lenders, borrowers and payment businesses on the Financial Services Act 2025, the prudential rulebooks applied through the Application of Laws Act 2024, and the security and withholding rules in the Companies Act 2025 and the Income Tax Act 2025. This page sets out where the lines fall and how we work a deal through them.
Our legal advisory
- Banking licence applications for Accepting Deposits, which may be made by a body corporate or a partnership.
- Perimeter advice on Providing Credit, Arranging Credit and Providing Money Services, and the exclusions that take activity outside them.
- Loan and security documentation under GMC law, including registration of charges within 30 days.
- Financial assistance restrictions for public companies and their subsidiaries.
- Withholding on interest paid to non-residents, and approved foreign loan applications.
- Legal opinions on capacity and enforceability for lenders taking GMC-law security.
- Mandatory appointments for banks, including the Finance Officer.
How GMC banking and finance law works, in plain terms
Accepting Deposits is a specified activity where "money received by way of Deposit is lent to others", or where other activity is financed materially out of deposit money. Sums received by a practising lawyer in the course of the profession are not deposits, and neither are sums received for the issue of certain debt instruments. Where deposits are taken in breach of the General Prohibition, the depositor may apply to the Court for an order to recover the money.
Providing Credit means "Entering into a Credit Facility with a person in his capacity as a Borrower or potential Borrower", and exercising a lender's rights under a facility is itself a specified activity. A Credit Facility is a specified investment. Incidental or connected lending is excluded, and groups and joint enterprises have their own exclusion. An agreement made in breach of the General Prohibition is unenforceable against the counterparty.
Capital and liquidity requirements sit in the Prudential rulebook (PRU) applied by Schedule B to the Application of Laws Act 2024, not in the Act; we confirm the figures with the regulator.
On security, a charge created by a company must be lodged with the Registrar within 30 days, failing which it is "void against the liquidator and any creditor of the company" so far as it confers security. On tax, interest paid to a person not known to be resident in GMC attracts deduction at 15% under the Income Tax Act 2025, unless the loan is an approved foreign loan, which can carry exemption or a concessionary rate for loans financing productive equipment.
Who this is for
- International banks establishing a GMC deposit-taking subsidiary.
- Private credit funds and non-bank lenders lending into GMC.
- Borrowers raising USD debt secured on GMC assets.
- Payment and remittance businesses that need to know whether they are taking deposits.
How a legal advisory engagement runs
- Perimeter opinion. We map the product to Accepting Deposits, Providing Credit, Arranging Credit and Providing Money Services and the relevant exclusions, so you know what needs a licence.
- Licensing. We advise on the application, the Threshold Conditions and the Approved Persons where a licence is required.
- Documentation. We draft the facility, security and intercreditor documents under GMC law, and the charge filing documents.
- Tax structuring. We advise on withholding and any approved foreign loan applications available to you.
- Closing opinions. We deliver the capacity and enforceability opinions lenders and agents ask for at completion.
Frequently asked questions
When does a customer balance become a deposit?
When money is received by way of deposit and is either lent to others or used materially to finance the business. Stored-value balances need analysis against the money-services activity and the deposit exclusions, and we advise on it before you launch.
Can a non-bank lend into GMC without a licence?
Providing Credit is a regulated activity when carried on by way of business in GMC. There are exclusions for incidental lending, for groups and for a Non-GMC Person, and we test each against your facts.
What happens if I lend without a licence?
The agreement is unenforceable against the borrower, who may recover money paid and compensation. The Court may allow enforcement where the lender reasonably believed it was not contravening the General Prohibition, and we assess that risk early.
Do I have to withhold tax on interest paid to a foreign lender?
Yes, at 15%, unless a double taxation arrangement or an approved foreign loan approval applies. We confirm which one is open to you before the loan is drawn.
How is security over a GMC company's assets perfected?
By lodging particulars of the charge with the Registrar within 30 days of creation. We advise on the filing deadline so the security is not lost.
Contact
Basnet Law Pte. Ltd. is the first law firm incorporated in the Gelephu Mindfulness City.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
